Project Final DSP

WORKING CAPITAL MANAGEMENT &RATIO ANALYSIS
WITH REFERANCE TO DURGAPUR STEEL PLANT
Abstract
By minimizing the amount of funds tied up in current assets, firms are
able to reduce financing costs and/or increase the funds available for
expansion. By using the SAIL annual accounts book Working Capital
Management Survey, we provide insights into the performance of
surveyed firms across key components of working capital management.
We discover that significant differences exist between industries in
working capital measures across time. In addition, we discover that these
working capital measures, themselves, change significantly within
industries across time.
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PREFACE
This project has been prepared in partial fulfillment for the degree of M B A (Master of Business
Administration). A project is a work plan device through investigation and analysis to achieve a
set of objective within a set of period. A student assigned a topic and required to prepare a report
after making a study of working of an organization.
I was assigned to prepare a project report of Durgapur Steel Plant, a unit of Steel Authority of
India Limited (SAIL). Financial management has emerged as interesting and exciting area for
academic studies as well as for the practical financial managers. Financial Management covers
the decision taken by and individual or a business firm, which have financial implication. In case
of corporate form of organization, where there is a separation of ownership and management, as
well as in other form of implications of decision process is evaluated in terms of maximization of
value of the firm. So the decision process is oriented towards the objective of maximization of
wealth of shareholders as reflected in market price of the share.
Working Capital or net current asset is the excess of Current Assets over current liabilities. All
organization has to carry working capital in one form or the other. The efficient management of
working capital is important, from the view point both liquidity and profitability.
* Poor management of working capital means that firms are unnecessary tied up in idle assets,
hence, reducing the liquidity and also reducing the ability to invest in productive assets such as
plant and machinery, so affecting the profitability.*
An effort has been made in the present study titled “Study on Working Capital Management on
SAIL with special reference to “Durgapur Steel Plant” to understand the different financial
implication and to make a detailed and in depth study of various elements of working capital in
Durgapur Steel Plant to come out with an effective result of the study and simultaneously to
suggest scope for further improvement.
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ACKNOWLEDGEMENT
For any task to be successful hard work and dedication are must .If it is backed with the blessing
of god along with unhindered support and guidance it will reach the ultimate without losing the
track.
I wish to express my gratitude to all the concerned person who have extended their kind help,
guidance and suggestion without which it could impossible for me to complete this project
report.
At first I would like to pay my sincere thank to my external guide Mr.S.K.NAYAK,(Assistant

General Manager) Finance and accounts department ,Durgapur steel Plant for not only his
valuable guidance but also for the freedom he rendered to me during this project. I am also
thankful to Main Accounts department (DSP) for providing us all data related to our research.
I am also thankful to my college INTERNATIONAL INSTITUTE OF PLANNING AND

MANAGEMENT, NEW DELHI, for providing me this golden opportunity to do internship and
learn with industry exposure. Lastly I would like to thanks Mr.Amit Bagga for his support to
make me understand financial management without which I could not do this project.
Last but not the least I would like to thanks all the staff of Durgapur steel plant and the
respondent for their valuable time and support for this project.
The data, facts, figures mentioned, and information provided we will be the solely responsible
for any remaining errors of fact or judgment.
(…………………………..)
VED PRAKASH CHOUBEY
3
Indian Steel Industry: An Overview
The economic liberalization 1991 marked the emergence of

several private players in this space. Private investment flowed
into the sector, adding fresh capacities. The private sector
produced 59% of the crude steel in 2005.
Current economic indicators all predict growth. Continuously

improving macro-economic factors, a younger demographic
profile, urbanization, government focus on infrastructure,
increasing demand for automobiles and houses are likely to push
up demand for steel. Industrial production grew at a CAR of 6.5%
during 1995-2005, with demand for passenger vehicles growing at
11%.
Key findings:
-Steady GDP growth and investment in infrastructure are crucial

for pushing up the demand for steel.
-In 2005; the government drafted the Nation Steel Policy (NSP) to
pave the way for a modern and efficient steel industry. The policy
targets an increase in production to 110 million tones by 2020 to
meet the expected expansion in domestic and international
demand.
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-Current state of low per capita consumption of steel (30kg)

provides an opportunity for the steel industry.
*-Global steel demand is rising on the back of accelerated

infrastructure activity in China, CIS and India, housing boom in
USA, and white goods resurgence in Europe. During the recent
recessionary phase, the industry has consolidated in terms of
ownership as well as mothballing of inefficient capabilities. Steel
prices continue firming up.*
-For the first time in last 20 years, there is demand growth all over
the world for steel.
-In US, the demand is led by booming housing industry.

Additionally, the auto industry is showing signs of recovery as
auto sales hit their strongest levels for the year in July even as US
posted a 2.4% GDP growth.
-In Europe, there is demand from a buoyant housing and white

goods industry sources.
-In India, China and other Asian countries the demand is led by
emphatic Investment activities in infrastructure,
-Russia and other CIS nations are also witnessing string internal
demand.
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-Iraq reconstruction work is expected to fuel further demand for

steel over the next three years.
-China is consuming steel like never before its infrastructure with

investments such as Three Gorges project on Yangtze as well as
part of its build to the Beijing Olympics in 2008 and the Shanghai
Expo in 2010.
-The demand supply gap is expected to increase and this will drive
steel prices northwards, even as the global steel industry is not
prepared for this demand onslaught.
1. Introduction
1.1. Industrial Definition
The Indian steel industry comprises producers of finished steel,

semi-finished steel, stainless steel and pg iron. The private sector
controls almost two-thirds of the steel market, while the public
sector producers have the remaining on-third market structure.
1.2. Industrial Segments
The industry can be classified into the following categories:
a) Iron Ore b) Pig Iron c) Sponge Iron
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d) Flat Steel e) Long Steel f) Alloy Steel
2. Market Dynamics
2.1 Market Overview 2.2 Market Trends
India occupied the eighth *Low Per Capita Consumption

position in terms of Rise of the Private Sector
worldwide crude steel output. Public Sector versus Private
India’s per capita steel Sector Gradual Industry
consumption is low at 30kg Consolidation.
compared to global standards
for developed countries at
400 to 500 kg.
2.3 Key Drivers 2.4 Major Issues and

Implications
Huge Investment in
Infrastructure Booming Rising Raw Material Prices
Industrial Production High Cost of Imported Coking
Coal Low R&D Expenditure
Inefficient Mining of Iron Ore
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Demand-Supply Gap
3. Political, Economical, Social, Technological Analysis

(PEST Analysis)
3.1 Political Factors 3.2 Economic Factors
Recommendations on Captive *GDP Growth Rate Reduction

Mines National Steel Policy to in Customs Duty
Remove Bottlenecks.
3.3 Social Factors 3.4 Technological Factors
Rural-Urban Divide Higher Popularity of Steel Portals

Disposable Income Applications of SML(Steel
Markup Language)
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4. Michael Porters Five Forces Analysis
4.1 Buyer’s Power 4.2 Supplier’s Power
Increasing Demand for Steel High Raw Material Prices Lack

Fragmented Coke Suppliers. of Captive Source Hurting
Steel Producers Lack of
Transportation
Backward Integration.
4.3 Intensity of 4.4 Threat of New
Competition Entrants
Competition from Foreign High Cost of Basic Inputs and

Players Spurt in Merger and Services.
Acquisition Activities.
4.5 Threat of Substitutes
Use of Aluminum/Plastic
5. Industry Outlook
The steel industry is in the growth phase. Indian steelmakers plan

to increase annual steel production capacity to 8.14 million Tones
by FY10, larger than the domestic forecast of 65 million.
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ORGANISATIONAL PROFILE
An introduction
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both basic and special steels for domestic
construction, engineering, power, railway, automotive and defense industries and for sale in
export markets.
Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL
manufactures and sells a broad range of steel products, including hot and cold rolled sheets and
coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and rods,
stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and
three special steel plants, located principally in the eastern and central regions of India and
situated close to domestic sources of raw materials, including the Company's iron ore, limestone
and dolomite mines. The company has the distinction of being India’s largest producer of iron ore
and of having the country’s second largest mines network. This gives SAIL a competitive edge in
terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel
making.
SAIL's wide range of long and flat steel products is much in demand in the domestic as well as
the international market. This vital responsibility is carried out by SAIL's own Central Marketing
Organization (CMO) and the International Trade Division. CMO encompasses a wide network of
34 branch offices and 54 stockyards located in major cities and towns throughout India.
With technical and managerial expertise and know-how in steel making gained over four
decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy
to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at
Ranchi which helps to produce quality steel and develop new technologies for the steel industry.
Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management
Training Institute (MTI) and Safety Organization at Ranchi. Our captive mines are under the
control of the Raw Materials Division in Kolkata. The Environment Management Division and
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Growth Division of SAIL operate from their headquarters in Kolkata. Almost all our plants and
major units are ISO Certified.
About SAIL
SAIL was formed on January 24th, 1973 with the objective of promoting and integrated and
efficient development of the Iron and Steel Industry to achieve national economic objective.
Over the years the corporate structure of SAIL has undergone transformation, with several
subsidiaries merging into SAIL to secure better management and greater efficiency in their
working and few units being de-linked.
SAIL is the largest integrated Steel producer in India and the 10th largest Steel making company
in the World. It has multi-location facilities to manufacture a variety of basic and especially steel
products. Rourkela Steel Plant (RSP) primarily manufacturer flat products while Bhilai Steel
Plant (BSP) AND Durgapur Steel Plant (DSP) predominantly manufacturer long products. The
special steel plant, Alloy Steel Plant (ASP) and Salem Steel Plant (SSP) manufacturer Alloy and
Steel Products. The aggregates capacity of saleable steel is 9.48 million tones.
The Steel Authority of India Limited (SAIL) is a wholly owned enterprise of the Government of
India, responsible of management of five integrated Steel Plant at Bhilai, Bokaro, Burnpur,
Durgapur and Rourkela and the Alloy and the special steel plant at Durgapur, Salem.
Maharashtra electro smelt limited has become a subsidiary of SAIL with effect from October 18,
1986. Visvesvarya Iron and Steel Limited, Bhadrabati earlier known as Mysore Iron and Steel
Limited has come under the fold of SAIL from July, 1989.
The Steel Authority of India Limited (SAIL) was formally incorporated at New Delhi on 24 th
January with an authorized capital of Rs. 2000 crores. The paid up capital as on 31st March 1974
was Rs. 1326 crores. The shares in the companies listed below and held by president of India
were transferred in March 1973 to SAIL and become subsidiaries of SAIL:-
 Hindustan Steel Limited.
 Hindustan Steel Work Construction Limited.
 Bokaro Steel Limited.
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 Salem Steel Limited.
 Bharat Cooking Coal Limited.
Integrated Steel Plants
Bhilai Steel Plant (BSP) in Chhattisgarh
Durgapur Steel Plant (DSP) in West Bengal
Rourkela Steel Plant (RSP) in Orissa
Bokaro Steel Plant (BSL) in Jharkhand
IISCO Steel Plant (ISP) in West Bengal
Expanding Horizon (1959-1973)
Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at
Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and
Steel Ministry. From April 1957, the supervision and control of these two steel plants were also
transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to
Calcutta in July 1956 and ultimately to Ranchi in December 1959.
A new steel company, Bokaro Steel Limited, was incorporated in January 1964 to construct and
operate the steel plant at Bokaro. The 1 MT phases of Bhilai and Rourkela Steel Plants were
completed by the end of December 1961. The 1 MT phase of Durgapur Steel Plant was
completed in January 1962 after commissioning of the Wheel and Axle plant. The crude steel
production of HSL went up from .158 MT (1959-60) to 1.6 MT. The second phase of Bhilai Steel
Plant was completed in September 1967 after commissioning of the Wire Rod Mill. The last unit
of the 1.8 MT phase of Rourkela - the Tandem Mill - was commissioned in February 1968, and
the 1.6 MT stage of Durgapur Steel Plant was completed in August 1969 after commissioning of
the Furnace in SMS. Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at
Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised to
3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.
Holding Company
The Ministry of Steel and Mines drafted a policy statement to evolve a new model for managing
industry. The policy statement was presented to the Parliament on December 2, 1972. On this
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basis the concept of creating a holding company to manage inputs and outputs under one
umbrella was mooted. This led to the formation of Steel Authority of India Ltd. The company,
incorporated on January 24, 1973 with an authorized capital of Rs. 2000 crore, was made
responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and
Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an
operating company.
Since its inception, SAIL has been instrumental in laying a sound infrastructure for the industrial
development of the country. Besides, it has immensely contributed to the development of
technical and managerial expertise. It has triggered the secondary and tertiary waves of economic
growth by continuously providing the inputs for the consuming industry.
JOINT VENTURES
SAIL has Promoted Joint Ventures In different areas power plant to E-
Commerce NTPC SAIL power Company Pvt. Ltd. set up in March 2001: this
50:50 joint venture between SAIL and the National Thermal Power
Corporation (NTPC) operates and manages the captive Power Plants – II of
the Durgapur and Rourkela Steel Plant which have a combined capacity of
240 M W.
 Bokaro Power Supply Pvt. Ltd

This 50:50 joint venture between SAIL and Damodar Valley Corporation (DVC)
formed in January 2002 in managing the 320 MW power generation and 1880
tones per hour steam facilities at Bokaro Steel Plant.
 Bhilai Electrical Supply Company Pvt. Ltd.

Another SAIL NTPC joint venture on 50:50 basic formed in March 2002
manages the 74 MW Power Plant –II of Bhilai Steel Plant which has an
additional capacity of producing 150 tones of steam per hour.
 UES SAIL Information Technology Ltd.

This 40:60 joint venture between SAIL and USX Engineers and Consultants. A
subsidiary of the US steel Corporation, Promotes information technology in
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steel sector.
 Metal junction Company Pvt. Ltd.

A joint Venture between SAIL and TATA Steel on 50:50 basic this company
Promotes E-Commerce activities in steel and related areas.
 SAIL-Bansal Services Centre Pvt. Ltd.

SAIL has formed a joint venture with BMW industries Ltd. In 40:60 basic to
promotes a service centre at Bokaro with the objective of adding value to
steel.
 North Bengal Dolomite Ltd.

A joint venture between SAIL And West Bengal Mineral Development
Corporation Ltd. On 50:50 basic was formed for development of Jayanti
Dolomite Deposit, Jalpaiguri for supply of Dolomite to Durgapur Steel Plant
and other plants.
 Romelt – SAIL (India) Ltd.

A joint venture between SAIL. National Mineral Development Corporation
(NMDC) and Russian promoters for marketing Romelt technology developed
by Russia for reducing iron bearing materials, which is carried out with
carbon in single reactor with the use of oxygen.
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About Durgapur Steel Plant

Durgapur Steel Plant is one of the integrated steel plants of Steel Authority of India
Limited, located in Durgapur, in the eastern India state of West Bengal. It is one of the
plants that have played a historically important part in the industrial development of India.
Although not a separate company, it is the largest industrial unit in the state of West
Bengal.
Historical background
Durgapur is an industrial metropolis in the state of West Bengal, India, located about 160 km
from Kolkata. It was a dream child of the great visionary Dr. Bidhan Chandra Roy the second
chief minister of the state. The well laid out Industrial Township was designed by Joseph Allen
Stein and Benjamin Polk It is home to the largest industrial unit in the state, Durgapur Steel Plant
one of the integrated steel plants of Steel Authority of India Limited. Alloy Steels Plant of SAIL
is also located here. There are a number of power plants, chemical and engineering industries.
Some metallurgical units have come up in recent year.
Set up in the late 1950s with an initial annual capacity of one million tonnes of crude steel per
year, the capacity of Durgapur Steel Plant (DSP) was later expanded to 1.6 million tonnes in the
1970s. A massive modernization programme was undertaken in the plant in early ‘90s, which,
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while bringing numerous technological developments in the plant, enhanced the capacity of the
plant to 2.088 million tonnes of [hot metal], 1.8 million tonnes crude steel and 1.586 million
tonnes saleable steel. The entire plant is covered under ISO 9001to 2000 quality management
system.
The modernized Durgapur Steel Plant now has state-of–the-art technology for quality steel
making. The modernized units have brought about improved productivity, substantial
improvement in energy conservation and better quality products. DSP’s Steel Making complex
and the entire mills zone, comprising its Blooming & Billet Mill, Merchant Mill, Skelp Mill,
Section Mill and Wheel & Axle Plant, are covered under ISO: 9002 quality assurance
certification.
After the commissioning of the modernized units, DSP is all set to produce 2.088 million tonnes
of hot metal, 1.8 million tonnes of crude steel and 1.586 million tonnes of saleable steel annually.
Location
Situated at a distance of 158 km from Kolkata, its geographical location is 23° 27' North and 88°
29' east. It is situated on the banks of the Damodar River. The Grand Trunk Road and the main
Calcutta-Delhi railway line pass through Durgapur.
The city of Durgapur
Durgapur is on the main Kolkata–New Delhi line. From a sleepy settlement, the town today hosts
a variety of educational institutions, shopping malls, complexes with eateries and a multiplex,
amongst other commercial attractions. Durgapur is fast turning into the central location for the
entire region—with the entry of big sex business houses and entrepreneurs, the city is all set to
undergo a change in its own lifestyle and in the outlook of its residents. Durgapur is situated in
between the two rivers—Damodar and Ajay— and also between two districts—Bankura and
Birbhum. There are many townships here mainly "Steel Township", "DPL Township", "MAMC
Township" etc. once Durgapur was the only city in India with two steel plants, Durgapur Steel
Plant and Alloy Steel Plant.
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PRODUCTS OF SAIL
SEMIS Bloom, Billets and Slabs

LONG PRODUCTS Structural
Crane Rails
Bar, Rods and Re-Bars
Wire Rods
FLAT PRODUCTS HR Coils, Sheets and Skelp Plates,
CR Coils and Sheets, GC Sheets, Tin
Plates, Electrical Steel.
TUBULAR PRODUCTS Pipes
RAILWAY PRODUCTS Wheels, Axles, Wheel Sets.
PLANT WISE DETAILS

BHILAI STEEL PLANT Blooms, Billets and Slabs, Beams,
Channels, Angels, Crane Rails, Plates,
Pig Irons, Chemicals, Fertilizers.
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BOKARO STEEL PLANT HR Coils and Sheets, Plates, CR Coils

and Sheets, GP Sheets, Pig Iron,
Chemicals and Fertilizers.
DURGAPUR STEEL PLANT Blooms, Billets and Slabs, Joists,
Channels, Angels, Bar, Rods, Re-Bar,
Skelp, Wheels, Axels, Pig Iron,
Chemicals and Fertilizers.
ROURKELA STEEL PLANT HR Coils, Plates, Cr Coils and Sheets,
GP Sheets, Tin Plates Electrical
Sheets, Pipes, Pig Irons, Chemicals
and Fertilizers.
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INTRODUCTION
The management of fixed assets and long –term financing .The management of current assets is
similar to that of fixed assets in the sense that in both cases a firm analyses their effects on its
return and risk .The management of fixed and current assets ,however, differ in three important
ways: first, in managing fixed assets , the time is a very important factor ; consequently
,discounting and compounding and compounding techniques play a significant role in capital
budgeting and a minor one management of current assets . Second, the large holding of current
assets, especially cash, strengthens the firm’s liquidity position and reduce riskiness but also
reduce the overall profitability. Thus, a risk –return trade off is involve in holding current
assets . Third, level of fixed as well as current assets depend upon expected sales, but it is
only current assets which can be adjusted with sales fluctuations in the short run. Thus, the firm
has a greater degree of flexibility in managing currents assets.
CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital –gross and net.
Goss working capital refers to the firm’s investment in current assets . Current assets are
the assets which can be convert be into cash within an accounting year and include cash,
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short – term securities, debtors , accounting receivable or book debts bill receivable and stock
inventory
Net working capital refers to the difference between current assets and current liabilities .
Current liabilities are those claims of outsiders which are expected to mature for payment within
an accounting year and include creditors accounting payable, bill payable and outstanding
expenses. Net working capital can be positive or negative. A positive net working capital will
arise when current assets exceed current liabilities. A negative net working capital occurs when
current liabilities are in excess of current assets.
The two concepts of working capital –gross and net- are not exclusive; rather, they have equal
significance from the management viewpoint.
REVIEW LITERATUE
INTRODUCTION
Working capital management refers to Management of current assets and current liabilities.
Working capital only the investment in current assets, which include short-term assets cash &
Bank balance inventories, receivables and other marketable securities.
Working Capital Management
Concepts of Working Capital
There are two concepts of working capital:
 Gross Working Capital
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 Net Working Capital
GROSS WORKING CAPITAL

Gross is the total of all current assets. It is the total investment in short-tem curren assets. It refers
to the firm’s investment in total current circulating assets. The concept of gross working capital is
applied where the firm has no current liabilities. The investment which firm has made in current
assets is from their own internal source and they have not taken any short-term loan. Or they
have not incurred any current liabilities.
Net Working Capital

Net working capital is the difference between current assets and current liabilities. Normally any
organization includes some current liabilities to finance. Their current Assets so, after realization
of investment on current liabilities from the total current assets in order to get the net current
assets.
Formula of Net Working Capital:
Net working capital = Current asset-Current liabilities.
Current Assets
a) Raw materials and components
b) Work in process
c) Finished Goods
d) Trade Debtors
e) Loan and Advances
f) Cash and Advances
g) Inventories
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Current Liabilities
 Sundry creditors
 Trade advances
 Borrowings (short-term)
 Provision
Generally any organizations uses the concept of Net working capital because
They have some current liabilities with the help of which they make
Investments in current assets. So practically the concept of
(Current assets – Current liabilities) is applicable.
Working capital management is a significant facet of financial management, its importance stems
from the following reasons:-
 Invest in current asset represents a substantial portion of total investment. Existence of

working capital is imperative .in any firm. Fixed assets generally consume a large chunk
of total funds that can be used at optimum level supported by sufficient working capital.
 Investment in current asset and the level of current liabilities have to be geared quickly to
change cells. Fixed asset investment and long-term financing are also responsive to
variation in sells. However the relation is not as close and direct as in the case of working
capital components.
 The working capital component involves investment of funds of farm. If working capital
level is properly maintained and managed, then it may result in unnecessary blockage of
scarce resource resources of farm.
NEED OF WORKING CAPITAL
• To sustain sales activities in operating cycle period

• To perform day to day operations
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• To purchase raw materials payments of wages and other expenses required for the
manufacture of goods
• Increase in good will
Classifications of Working capital

Permanent working capital
This represents what the firm requires even at the bottom of its sales Cycles. It refers the
minimum amount of investment in current assets. This is required at all time to carry out the
minimum level of business activities. In other words it represents the current assets required on
current basis over the entire year.
Temporary Working capital
It reflects a variable component that moves in line with seasonal fluctuations. This is the amount
of Working Capital that keeps on fluctuating on the basis of business activity. In other words,
represents additional current assets required at different times during the operating period.
Several strategies are available to a firm for financing capital requirements. These are as
follows:-
Strategy A:- Long term financing is used to meet fixed assets requirements as well as peak
working capital requirements. When the working capital requirements is less than its peek level,
the surplus is invested in liquid assets(cash and marketable securities).
Strategy B:- Long term financing is used to meet fixed asset requirements. Permanent working
capital requirement and a portion of fluctuating working capital requirement. During seasonal
upswing, short-term financing is used. During seasonal downswing, surplus is invested in liquid
assets.
Strategy C:- Long term financing is used to meet fixed asset requirement and permanent
working capital requirement. Short-term financing is used to meet fluctuating working capital
requirement.
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Capital Requirements and Their Financing

Working capital cycle is required because of the time gap between sales and
actual sales realization in cash. This gap is technically known as operating
cycle.
In manufacturing unit, operating cycle goes like this:-
•
Convention of cash into raw material.
•
Convention of raw material into work in progress.
•
Convention of work in process into semi finished
goods.
• Convention of semi finished goods into finished
goods.
• Convention of finished goods into debtors.
The total operating cycle can be divided into following period:-
Accounts Payable period:-

The time required between date of sales and date of payments.
Inventory Period
Firm purchases raw material and converts these raw materials into finished gods and sell the
same. The time is between the purchase of raw materials and the sale of finished goods is the
inventory period.
Accounts Recieveable period:-

When the finished goods are sold for cash. Some are sold on credit and are realized later. The
period that elapses between the date of sales and the date of collection of receivables is known as
Accounts receivable period.
Operating Cycle:-
This time that elapses between the purchase of raw materials and collection of cash from sales is
referred to as operating cycle.
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Thus we can say
that,
Operating cycle =Inventory period + Accounts Receivable period
Cash Cycle:-
The time leg between the payment for raw material purchased and the collection of cash for sales
is referred to as cash cycle, we can say that,
Operating Cycle=(Inventory period + Accounts receivable period) – Accounts payable period.
Note:-
In some manufacturing unit, the semi-finished goods are also sold on cash basis or on credit
basis. As Durgapur Steel Plant, semi finished goods like slab, blooms billates are sold either on
cash basis or on credit basis.
Finished goods are not always sold for cash. They are also sold on credit, which gets converted
into accounts receivables which after realization get converted into cash. As in Durgapur Steel
Plant, they directly sell some finished products on credit basis.
2.2 E) Objective of Management of Working Capital

The basic objective of working capital management is to manage the firm’s current assets and
current liabilities in such a way so as to maintain a satisfactory level of working capital. The
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current assets should be enough to cover the current liabilities to maintain a reasonable safety
margin. It should be taken into consideration that the current liability should not be more than
current assets or the working capital should not paying up for current liabilities. Also the
different working capital components are to be balanced.
Working capital management has a great effect to firm’s profitability, liquidity and structural
health. Financial manger therefore chalks out appropriate working capital management policies
in respect to each components and sound structural health of the organization.
Function of Working Capital management
a) In order to determine the working capital requirement of the firm, a number of factors like
product policies, length of manufacturing process, rapidly to turnover, seasonal fluctuations are
considered.
Techniques of assessment of working capital management
• Estimation of components of working capital.

• Percentage of sales method.
• Operating cycle approach.
Where O= R + W + F = D - C
R=raw material and stock store period
W=word in process period
F=finished goods storage period
D=debtors collection period
C=Creditors payment period
b) Source from which the funds are to be raised:-

The working capital requirements can be met both from short-term and long-term
sources of fund. It will be appropriate to meet at least 2/3 of permanent working
capital requirements from long-term sources of fund.
1.Factors influencing working capital requirements:-
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The working capital needs of a firm are influenced by numerous factors. The important factors
are:-
The working capital requirement of a firm’s closely related to the nature of business. A service
firm generally has a short operating cycle and sells on cash basis and has a modest working
capital requirement. On the other hand, a manufacturing unit has a long operating cycle, which
sells largely on credit and has substantial working capital requirements.
2.Seasonality of Operations:-
Firms, which have seasonal sales, or firms who deal in seasonal products have highly fluctuating
working capital requirement. The working capital requirements of such a firm increases
significantly during the peek season when there a demand for the product and again decrease
during off season. On the other hand, firms having even sale during the year tends to have stable
working capital requirements.
3.Production policy:-
Firms which are having seasonal fluctuation in working capital requirement may follow a
production policy, which may reduce the variations working capital requirement.
For example, manufactures season products may maintain a steady production through and the
year rather than to intensify the products activity during the peak business season. Such a
production policy may result in decrease in fluctuation working capital requirements.
4.Market Condition:-
Degree of competition in the market has also its effect on working capital needs. When the
competition is big, huge inventory of finished have to be maintained to meet the demand of
customers as customer will not wait for that specific brand, as goods from different brands are
available in the market. Again in competition how, a firm can manage with a smaller inventory of
finished products because in this situation customers can serve the delay. Also in this situation a
firm can insist on cash payment and avoid lack of funds counts receivable.
27
Thus in a competitive market, working capital requirements are more because of more
investment in finished product, inventory and accounts receivable whereas in the market where
the competition is weak, situation is reverse.
FINANCING OF WORKING CAPITAL OF DIFFERENT SOURCES
28
SOURCES OF WORKING CAPITAL
LONG TERM SOURCE Short term Source
Issuer of Share • Internal Sources

Provision of
Depreciation
Issue of Debenture
Provision for tax.
Ploughing back of profit

• External Sources
Loan from Bank or
other
Taking long term loan
Financial institutions
Factors effecting the work capital requirements

• Nature of Business
• Seasonality of operation
• Product policy
29
• Market conditions
• Condition of supply
Some of the sources of finance that are used to support current assets. Accruals trade credit.
 Working capital advance by commercial banks.

 Regulation of bank finance.
 Public deposit.
 Inter corporate deposit.
VARIOUS FINANCE DEPARTMENT VISITED

As I am doing a project in finance I am concerned with the finance department of the company.
The different departments in finance are:-
30
COST AND COST CONTROL: - The function of cost section is to provide pre
determined and historical costs of production and services produced in the plant during the year.
Beside normal routine work, this section endeavors to focus attention on the areas of high cost
and analysis reasons for the same.
ESTABLISHMENT AND ADMINSTRATION SECTION: - Objective of

the section is to function as a centralized controller in rendering service. To the several of FAD in
the matter of personal, procurement, for timely availability of required of printing & Stationary
Furniture and other articles arranging service contract for matters of personal, management for
running of the department.
FUNCTIONS:-
 Travelling Allowance
 L.T.C\L.L.T.C
 Festival Advance
 Loan for Purchase Motor\Car etc.
 Medical Advance\Bill
 Tuition Fees Reimbursement (for the employee’s wards who are studying other then DSP
School)
 P.F Loan (Refundable\Non-Refundable)
 Granting Assistance Towards Funeral Expenses
 Imprested Cash
PURCHASE SECTION:-
1. To attain opening of tender for purchase of stores, spares, raw material, capital item etc.
2. To check the co-operative statement prepared on the basic of the offers received from the
supplier against tender floated by the M.M Departments.
3. To attain the commercial price negotiation meeting under the Chairmanship of head of
MMD, CMM or senior Manager along with the representative of intending departments.
4. To attain purchase committee meeting and assist the member in evaluating the offers.
31
5. To examine the recommendation for extension of delivery timing in acceptance of excess

quantity supplied by the suppliers.
6. To attend the materials review board meeting raw materials supplied are off from
satisfaction
PURCHASE AUDIT CELL:-

Ensure receipt of weekly statement from each purchase officer. Failure to submit weekly
statement of order placed to purchase Audit will be treated as a serious branch of procedure.
FOLLOW UP ACTION TO AUDIT QUIERY :-

Audit issued by purchase audit cell immediately examine the files, specify that reply to audit
memo should reach audit cell within 15 days. Weekly remainder are to be issued for non
receipt of replies to audit memo.
MAIN ACCOUNTS:-
Main Accounts section is primarily responsible for compiling the monthly, half yearly,
quarterly, and annual accounts keeping in view the provisions of company Act and to ensure
the implementation of chart of account of SAIL and guidelines given in the accounts manual.
In addition to this the section prepares various MIS report relating to financial management
for information and management control.
The functions of main account section are indicated as under:-
 MIS and other report
 Co-ordination and review of financial statement
 Inter Unit Current Account(IUCA)
 Routine accounting
 Asset register and accounting of assets
 Compilation of accounts
 Consolidation of accounts
MISCELLANIOUS BILLS AND ACCOUNT SECTION:- This section

deals with work order and misc.
32
NATURE OF MIICELLANOUS BILLS:- As mentioned above, it posses

various types of bills as detailed below:-
• Contingent advance
• Legal charges
• Library books
• Holding tax, Road tax, Vehicle insurance etc.
• Audit fees
• Bus bills-final
• CISF bills (other than pay)
• Canteen bills
• Donation and contribution
• Sports, funeral, gardening expenses
• Machining Bills
• Canteen subsidy canteen interest
• Repair and maintenance bills
• Medical bills and telephone bills
SALES INVOCING SECTION:- Invoices are required to be raise in respect of

DSP products
• Sold to customer
• Transferred to various stockyard
• Transferred to sister units
Invoices are also raised for:-

• Sale of skull
• Sale of rejected products through auction
33
Transferred to sister unit after getting DSP products further processed by outside contractor
THE BASIC DOCUMENTS REQUIRED FOR RAISING

INVOICES ARE:-
 Sale order
 Amendment to sale order
 Dispatch advice
Sale orders are issued by stores department of DSP for sale of Skull and sale through action and
by marketing department for items sold to customers or transferred to sister plants after getting
the DSP products processed/machined by contractors.
BUDGETS & BUDGGETARY CONTROLL SECTION

BUDGETS:-
A budget is the comprehensive and coordinate plain, express in financial
terms for the operation and resources of an enterprise for some specific
period of the feature.
OBJECTIVES:-
The objectives of setting budget are as follows:-
 A budget is blue print of the desired plan of action or operation.
 The budget serves as declaration of policies and also defines the

objective for executives at all level of management
 Budgets provide means of coordination of the business as a whole
34
 Budgets are means 0f communication. Complex plans laid down by the

top management are passed on to those who are responsible for
putting them into action.
 Budgets facilities Centralized control with delegated authority and

responsibility.
BUDGETS CONTROL:-
In a big organization like DSP, budgetary control is an effective tool for
implementing cost control and cost reduction program. Budgets section is
mainly entrusted with following function:-
 Preparation of operation Budget
 Preparation of capital Budgets
 Preparation of foreign exchange Budgets
Objective:-
The advantage of budgetary control system arises from the achievement of
the objects of budgetary control system arise from the achievement of the
objectives of budgeting i.e., profit planning and expenditure control are as
follow:-
 Budgetary control aims maximization of profits through effective

planning and control of income and expenditure- Directing capital and
resources to the best and most profitable channel.
 There is a planned approach to expenditure and financing of the

business so that economy is affected in the utilization of funds to the
optimum benefits of the concern.
 As budgets are set for each item of expenditure against department

and against each employee, they provide a motivating force arising all
concern to work efficiently and effectively.
35
Budgeting ensure adequate fund or working capital in the business during

the operational period.
THE OBJECTIVE OF PAY SECTION:-

 To ensure correct payment / Deduction as per the status and the rules
of the company
 To ensure timely payment
 Expedition settlement of separate employees
 Prompt payment separate employees.
 To ensure compliance with the statutory requirement
 Correct and timely accounting of all such payments and deduction

under appropriate head of account.
36
37
COMPRATIVE ANALYSIS OF WORKING CAPITAL

SAIL is having four main manufacturing units where the most of the
productions are carried on they are as follows:-
 Bhilai Steel Plant
 Bokaro Steel Plant
 Durgapur Steel Plant
 Rourkela Steel Plant
Apart from these steel plants, where are also other plants like Salem and
Visvesvarya Steel Plant. I have taken these four plants for comparative
analysis. I have considered data for five consecutive years starting from
2003. This comparative study will help to evaluate efficiency of working
capital management in DSP by analyzing trend of working capital. We can
frame appropriate credit policy. We can minimize blockage of fund by
knowing working capital. I have calculated working capital of all four plants
sequentially and try to find trend in working capital in past five years. Our
analysis in plant’s other then Durgapur Steel Plant is based on only financial
data provided by balance sheet. But, working capital management analysis
needs some non-financial details. So, it is not possible to take in depth
analysis of other plant. So, our in depth analysis confined to Durgapur Steel
Plant. I have not taken financial details of current year 2007-2008 because it
is in audit and not available for use.
38
CALCULATION OF WORKING CAPITAL FOR

ROURKELA STEEL PLANT
(In Crores)
YEAR 2007 2006 2005 2004 2003

Current
Assets
Inventories 746.7 718.11 500.44 466.86 698.23
Sundry Debtors 17.43 14.60 12.44 8.57 8.51
Cash And Bank 15.64 17.22 15.75 0.12 0.14
Interest 39.82 2.55 2.62 3.23 3.91
Receivable
Loan & Advance 0.00 0.00 0.00 1.42 2.84
Others 175.00 212.72 195.93 199.83 213.55
Total Current 914.95 965.20 727.18 680.03 927.18
Asset
CURRENT LIABILITIES AND PROVISIONS

YEAR 2007 2006 2005 2004 2003
Current Liabilities 422.96 400.82 395.69 451.17
Provisions 14.60 18.05 26.16 35.01
Total Current Liabilities 618.30 437.56 418.87 421.85 486.18
Net working capital 105.80 527.64 308.31 258.18 433.89
Current Ratio 1.74:1 2.21:1 1.74:1 1.61:1 1.91:1
39
CURRENT LIABILITIES AND PROVISIONS
Durgapur Steel Bokaro Steel Bhilai Steel Plant Rourkela Steel

Plant Plant Plant
Particulars 07- 06- 05- 07-08 06- 05- 07- 06- 05-06 07- 06- 05-06
08 07 06 07 06 08 07 08 07
Current 472. 428. 361. 1024. 846. 8 1303 1037 917.9 672. 5 499.45
Liabilities 34 63 92 56 66 49. .23 .99 2 33 57.
66 26
Provisions 704. 490. 440. 1870. 1322 1 1774 1088 960.8 939. 6 569.48
66 17 49 81 .67 239 .75 .90 1 67 35.
.82 75
1 918. 802. 2895. 2169 2 3077 2166 1877. 1 1 1068.9
177. 80 41 37 .53 088 .98 .39 43 612. 193 3
00 .88 00 .01
Current 914. 808. 639. 1835. 1862 1 2259 1951 1795. 1 1 965.12
Assets, 95 25 09 88 .44 826 .79 .26 09 147. 142
Loans & .11 18 .08
Advances
Current 0.77 0.87: 0.80: 0.63:1 0.86: 0 0.73: 0.92: 0.96:1 0.72 0 0.90:1
Ratio :1 1 1 1 .87: 1 1 :1 .96:
Ca/Cl 1 1
262. 110. 163. 1059. 307. 2 818. 175. 82.84 464. 5 103.81
05 55 32 49 09 62. 19 13 82 0.9
77 3
40
ANALYSIS
Liabilities The mount of current liabilities for last three years of DSP has
increased, especially in the previous it has increased by more than 10% due
to increase in other liabilities (472.34 crore 07-08 , 428.63 crore in 06-07)
This shows that payment period of DSP either of long duration or due to the
infrastructure development they are getting the raw material in less time
that is they do not have to order now before more than a month they get the
product in less time this is possible because of good infrastructure in the
country. Other plants of SAIL like Bokaro, Bhilai, Rourkela, Analysis of current
ratio which is maintained at the rate of 1.2:1. Hence all the plants are
maintaining current ratio at the rate of 1.2:1. Which decreasing working
capital. The ratio 1.2:1 is a sign of good working capital management i.e. less
blockage of the capital. The main reason for this is that now ordering time
has decreased.
Provision include gratuity, accrued leave wage revision employs family

benefits scheme etc. The provision for the year 07-08 is 704.66 Crores and
for the year06-07 is 790.17 crore. There is a increased in provision by 44%
which is mainly due to wage revision from 17.73 crore to 203.71 crore from
06-07 to 07-08 respectively. When we compare to other plants of SAIL the
provision increase by around 41%. From this weekend conclude that in the
previous year 07-08 there was provision for wage revision in all the plants of
SAIL which actually led to decrease in working capital for all the plant of SAIL
(comparatively).
41
42
Durgapur Steel
Plant
LOANS AND
43
ADVANCES
(Rupees in crore)
Particulars
LOANS 2008 2007 2006
Employs 19.3 15.49 10
-% of turnover 0.42% 0.41% 0.30%
Stores Issued _ _ _
-% of turnover _ _ _
Others 0.2 0.21 0.21

-% of turnover 0.00% 0.01% 0.01%
ADVANCES
Contractor and supplier 7.59 8.44 11.29
-% of turnover 0.16% 0.23% 0.35%
Employees 8.97 9.49 1.11

-% of turnover 0.19% 0.25% 0.03%
Income tax paid on order 0.8 0.36 0.26

-% of turnover 0.02% 0.01% 0.01%
Other 17.85 11.59 10.54

-% of turnover 0.39% 0.31% 0.32%
Export Incentive Receivable _ _ _

DEPOSIT
Port, Trust, Excise, Railway etc. 26.4 11.93 13.99
-% of turnover 0.57% 0.32% 0.43%
Others 0.11 0.13 0.11

-% of turnover 0.02% 0.03% 0.03%
Bokaro Steel
Plant
LOANS AND
44
ADVANCES
(Rupees in crore)
Particulars
LOANS
Employs 95.26 80.94 59.09
0.72 0.81
-% of turnover 0.85% % %
Stores Issued _ _ _
Others 5.15 5.23 5.96

0.06 0.07
ADVANCES
0.44 0.71
Employees 3.15 1.99 7.52

0.02 0.09
Income tax paid on order 0.62 _ _
-% of turnover 0.01% _ _
Other 121.01 77.34 82.97

0.82 1.02
45
DEPOSIT
Port, Trust, Excise, Railway etc. 80.34 37.92 77.41
0.40 0.95
Others 105.25 39.4 35.48

0.42 0.43
Bhilai Steel Plant

LOANS AND
ADVANCES
(Rupees in crore)
Particulars
LOANS
116.7 83.5 58.7
Employs 1 9 4
0.81 0.72 0.61
-% of turnover % % %
Stores Issued _ _ _
Others _ _ _
46
ADVANCES
12.7 12.2
Contractor and supplier 36.53 6 4
0.26 0.11 0.13
Employees _ _ _
Income tax paid on order _ _ _
Other 1.63 0.75 3.58

0.01 0.01 0.04
Export Incentive Receivable 2.22 1.04 1.26

0.02 0.01 0.01
DEPOSIT
Port, Trust, Excise, Railway 33.5 22.4
etc. 83.93 7 1
0.59 0.29 0.23
119.7 97.0 73.2

Others 9 1 4
0.84 0.83 0.76
Rourkela Steel
Plant
47
LOANS AND
ADVANCES
(Rupees in crore)
Particulars
LOANS
Employs 31.13 25.27 17.02
0.50 0.46 0.43
Stores Issued _ _ _
Others 0.93 0.93 0.93

0.02 0.02 0.02
ADVANCES
0.21 0.24 0.14
Employees 0.11 0.32 0.12

0.03
-% of turnover 0.002 0.01 %
Income tax paid on order _ _ _
124.4 123.7 128.8

Other 8 4 7
1.47 2.27 3.28
48
DEPOSIT
Port, Trust, Excise, Railway
etc. 10.58 13.9 7.22
0.17 0.25 0.18
Others 10.02 6.94 6.95

0.16 0.13 0.18
ANALYSIS
Loans to Employees: - By the last three year data I came to the conclusion
that the percentage of loans to employee is increasing. It gives the idea that
DSP cater very much to the needs of its employee with housing and other
asset loan but when I go for comparison with other plant I found that it is less
than the others that is Bhilai, Bokaro, and Rourkela has more loans to
employee than DSP.
Loans to Other: - Forms a very negligible percentage of turnovers. Last

year it has shown a decline as compare to 06-07 and 05-06, it forms a source
of income as interest is received from inter unit some time loans are also
provided to the registered suppliers and contractors to meet the demand of
requirement of DSP.
Advances: - From the above data we can conclude that advances to

contractors and suppliers are decreased. This is again because of the brand
equity of DSP in the market were as trends shows that other plants are
unable to maintain its consistency in advances to contractors and suppliers.
Advances to Employee: - In Durgapur Steel Plant, advances paid to

employee are consistent but in other plants this figure is very decreasing in
nature. The advances to employee are various in natures some may be due
to industrial to, training, festivals advances. DSP tries to provide its employee
with the latest skills and comfort by providing benefits\funds to employees.
49
Advances Income Tax: - Income tax paid in advance is shown in every

`year’s account where as Bokaro and Bhilai shows highest paid income tax it
is due to from the last year income/Sales of DSP, BSP and Bhilai are gone up
as compare to the previous year.
Deposits: - Port trust, excise, railways etc. shows deposit train in mix nature
it is decreased in 06-07 but increase in 07-08. This increase figure may be
due to DSP business had increased drastically. Due to this deposit are in good
train but when we compare to other plants of SAIL lacks behind in the case of
Bokaro and ahead of Rourkela, so we can analyze that this mix picture in
comes of deposit.
Deposit Other: - DSP deposit with other is very negligible in comparing to

other plants. Also, it has decreased in comparison to 06-07. Deposit with
other may include.
PERCENTAGE OF EXPENDITURE AND NET PROFIT OF

NET INCOME (2007-08)
50
51
INTRODUCTION TO RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of establishments and interpreting several of various ratios helping in marketing certain
decisions. However, ratio analysis is not an end in itself. It is only a mean of better
understanding of financial strength and weakness of a firm. Calculation of a mere ratio does not
serve any purpose, unless several appropriate ratios analyzed and interpreted. There are number
of ratio which can be calculated from the information n given in the financial statements.
USES AND SIGNIFICANCE OF RATIO ANALYSIS:-
52
The use of ratio is not confined financial managers only .There are different parties interested in
the ratio analysis for knowing the financial position of a firm for different purpose.
The supplier of goods on credit, banks, financial investor, share holder and management all make
use of ratio analysis as a toll in evaluating the financial position and performance of a firm for
grating credit, providing loans.
With the use of ratio analysis one can measure the financial condition of a firm and can point out
whether the condition is strong, good questionable or poor.
Following are the some of the uses:-
a)Help in decision making:- Financial statements are prepared preliminary for decision making
.But the information provided the financial statements is not an end in itself and no meaningful
.Conclusion can be drawn from this statements alone. Ratio analysis help in marketing decision
from the information provided in this financial statement.
B) Helps in financing forecasting and planning:- Ratio analysis is of much help in financial
forecasting and planning .planning is looking ahead and the ratio calculated for a number of
years work as a guide for the future. Meaningful conclusion can be drawn for future from ratio.
C) Helps in communication: - The financial strength and weakness of a firm are communicated
in a more easy and understandable manner by the use of a meaningful manner to the one for
whom it is meant.
Thus ratio in communication and enhance the value of financial statements.
D) Ratio even helps in co ordination, which is of most important in effective business

management. Better communication of efficiency and weakness of an enterprise result in better
coordination in the enterprise.
E) Help in control:-Ratio analysis even help in making effective control of the business.
Standard ratios can be based upon performance of a financial statements and variance or
deviation, if any can be found by comparing the actual with the standard so as the take a
corrective action at the right time.
LIQUIDITY RATIO
The liquidity ratio measures the ability of a firm to meets its short –term obligation and reflect
the short term financial strength of a firm. Liquidity ratio comprises of:-
Net Working Capital.
53
Current Ratio.
Acid Test or Quick Ratio.
Net Working Capital
Net working capital represents the excess of current assets over current liabilities. The term
current assets refers to assets which in the normal course of business get converted into cash
without diminution in value over a short period , usually not exceeding one year or length of
operation /cash cycle whichever is more
Current liabilities are those liabilities which are to be paid in short period , normally a year .
. Net Working Capital= Current assets –Currents Liabilities
Although Net Working capital is really not a ratio , it is frequency employed as a measure of
company ‘s liquidity position . An enterprise should have sufficient net working capital in order
to meet claims of the creditor’s and day-to-day needs of business. The greater is the amount of
net working capital the greater is the liquidity of the firm.
Acid Test Ratio

Formula: - Quick Assets/ Quick Liabilities
Ideal Norms: - 1:1
Purpose or Use: - It is used for measuring short term liquidity or solvency.

Quick Ratio is useful to verify the trend indicated by current ratio.
Significance & Interpretation:-
1) A high quick ratio or current ratio indicates a good short term solvency
capacity of the firm.
54
2) Even if the current ratio is high or low quick ratio does not indicate a
good debt repayment capacity of the firm.
3) The decision taken on the basis of current ratio can be verified through
quick ratio.
4) A high quick ratio ensures the safety of the safety of the investment of
the investment of the creditors
Components:-
1. Quick Assets = Current Assets-(stock + prepaid exp.)
2. Quick liability = Current Liability-Bank Overdraft
Inventory Turnover Ratio:-
Formula : - Net Sales/Average Stock
Ideal Standard: The average stock turnover followed in the industry may
be taken as ideal Norm.
Purpose & Use:
It is used into measure the short term solvency and overall activity of the
firm .The efficiency in inventory management can also be assessed on the
basis of ratio.
Significance:-
1) It show the rapidly with inventory trams into receivable through sales.
2) A low inventory turnover ratio indicates maintenance of high level of

inventory in the opening cycle process.
3) A high inventory turnover ratio implies low inventory level and quick
conversion of inventory into sales.
55
Components:
1) Net sales
Here the actual sales is taken as the Net sales
2) Average stock =Opening stock +Closing Stock/2
GROSS PROFIT RATIO
Formula: Gross Profit /Net sales X100
Ideal Norm : The ideal range is taken as 25%to35%
PURPOSE &USE
It is used to measure the profitability and managerial efficiency.
Significance:
1) A higher gross profit ratio indicates more profitability and the

managerial efficiency.
2) A lower gross profit reveals the week profitability and managerial

inefficiency.
3) A negative gross profit ratio means the direct cost are more than
the turnover and the firm is not able to meets its indirect cost.
4) It is always to analyze the gross profit a time series gross profit ratio
of a single year may not truly reveal the operating efficiency of the
firm but if it studied as a time series the analyst Can known the
increasing or decreasing trend.
Component
1) Gross Profit
The profit before Depreciation, interest .And tax is taken as Gross

Profit.
2) Net Sales
NET PROFIT RATIO
Formula:- Net profit/Net Sales X100

56
Ideal Norms:- Absent
Purpose & Use
It is used to measure the overall profitability and the efficiency of

the management in generating additional revenue over and above
and the total operating cost.
Significance
i. The net profit ratio shows the net Contribution made by sales
of rupee 1 to owner fund.
ii. Higher net profit ratio indicates better, overall profitability and
management efficiency managerial efficiency.
iii. A lower net profit ratio reveals the net earning is lower and
profitability and managerial efficiency is not up to the mark.
iv. If a firm has low net profit inspire of high gross profit ratio it
seems it has excessive indirect expenses.
Component:
1) Net profit
Profit before Tax is taken as the net profit.
2) Net Sales
The total sale is taken as the net sales.
Operating ratio
Formula : Cost of goods sold/Net sales X100
Ideal norm : 70% to 80% is accepted as a standard ratio
Purpose & use : It is used to analyze the profitability and

marginal efficiency.
Significance:
1) A low operating ratio indicates that the firm has more surpluses
In its hand after meeting operating cost.

57
2) A low operating ratio is indicator of high profitability and good
efficiency.
3) A very high operating ratio reveals poor surplus available to the
Firm after meeting operating cost.
4)Operating ratio must be used with caution because it may be

effected by uncontrollable factor beyond the firms control.
Current Ratio: - Current ratio relates current ratio to current

liabilities. According to the convention, current ratio should be 1.2:1. But
according to standard books 2:1 are standard ratio is 2:1. The ratio 1.2:1 is
just because of high level of infrastructure development. Now DSP do not
have to order its raw material more than two month in advance.
Compan
ies 2008 2007 2006 2005 2004
CA=1686 CA=1597. CA=1493 CA=1297. CA=1219.4
B.S.P .76 22 .09 22 4
CL=917. CL=830.2 CL=879.5 CL=919.4
67 5 2 2 CL=945.46
CR=1.83: CR=1.69: CR=1.41:
1 CR=1.9:1 1 1 CR=1.28:1
CA=1054 CA=808.2 CA=639. CA=589.3

D.S.P .65 5 09 4 CA=485.22
CL=532. CL=475.9 CL=310.9 CL=339.6
65 7 9 0 CL=434.51
CR=1.98: CR=2.05: CR=1.71:
1 CR=1.6:1 1 1 CR=1.11:1
CA=1187 CA=1065. CA=965. CA=727.1

R.S.P .54 13 02 8 CA=680.03
CL=517. CL=459.2 CL=437.5 CL=418.8 CL=421.85
58
65 4 6 7
CR=2.29: CR=2.31: CR=2.21: CR=1.74:
1 1 1 1 CR=1.60:1
CA=2787 CA=2437. CA=1826 CA=1279. CA=1001.7

B.S.L .55 45 .11 78 7
CL=1043 CL=934.6 CL=831.6 CL=731.6
.56 5 8 4 CL=741.87
CR=2.60: CR=2.19: CR=1.74:
CR= 1 1 1 CR=1.35:1
CA=2387 CA=20664 CA=1738 CA=14333 CA=8201.3

SAIL .67 .74 3.7 .63 3
CL=6025 CL=5276. CL=5191. CL=6437.
.56 65 70 91 CL=6104.80
CR=2.29: CR=3.91: CR=3.34: CR=2.22:
1 1 1 1 CR=1.34:1
This ratio is the indicator of the short term liquidity position of the farm.
Liquidity means the ability of the farm to meets it short-term obligation in
traditional view the conventional ratio is taken at 2:1 (i.e. every current
liability of Re=1 should be taken by a current asset of Rs. =2). But the
modern view the conventional ratio is taken at 1.2:1 (i.e. every current
liability of Rs.1should be taken by a current asset of Rs.1.2). The position of
D.S.P with respect of SAIL and its other plants can be viewed from the Table
(01) in the year 04-05the position of current ratio is better for D.S.P and SAIL
in compare to other years
DATA FOR CALCULATING FINANCIAL

RATIO
FOR LAST 4 YEARS & BUDGETING FOR 2007-
08
DURGAPUR STEEL PLANT
(Rs. Lakh)
BUDG
ET
2003- 2004- 2005- 2006- 2007- 2008-
ITEMS 04 05 06 07 08 09
Gross Block 61819 62017 62114 62613 64113 68111
59
9 2 9 6 7 8
33873 31080 28225 25722 24431 25006
Net Block 1 2 4 5 9 6
Working Capital 4734 23055 31568 40245 29665 37158
34346 33385 31382 29747 27398 28722
Capital Employed 5 7 2 0 4 4
Turnover (Including inter plant 30051 41418 38399 44880 56428 64125
transfer) 6 7 0 7 3 4
Sundry Debtors 3580 3909 878 1088 1743 1100
Inventories 38782 47307 53923 69151 76197 82105
Current Assets 49045 58132 63909 80825 91495 94805
Current Liabilities 26157 33553 36192 42863 47234 46200
Employees Remuneration &
Benefits 56424 46531 41839 54283 81749 65786
26202 36208 32595 38179 48319 55583
Net Sales Realization 1 5 9 4 3 9
Gross Profit (before interest 11644 13376 11146
&Depreciation) 45980 4 60692 93913 0 0
10086
Net Profit 8125 78401 26093 62376 1 76700
26460 36366 32669 39283 49114 55395
Value of production 5 3 3 3 4 2
NOTE:-
1. Gross Block excluded Work-in-progress
2. Net Sales Realization represents Gross sales and Inter-plant transfer

excluding Excise duty, Freight Outward, SDF, JPC and other pool fund.
3. Capital Employed represents Net block excl. WIP, plus working capital.
4. Value of prod. Represents Net Sales (+)/(-) Stock Accrn./Decrn.
5. Working capital represents Operation only.
COMPERATIVE FINANCIAL RATIOS

FIGURE IN %
60
2008-09
2005- 2006- BUDGET
ITEMS 06 07 2007-08 ED
TURN OVER TO GROSS BLOCK 61.8 71.7 88 94.1
NET SALES REALISATION TO GROSS BLOCK 84.9 85.1 85.6 86.7
SUNDERY DEBTORS(SALES) TO
TURNOVER(GROSS) 0.2 0.2 0.3 0.2
STOCK OF SEMI\FINISHED PRODUCT TO
TURNOVER 7.7 9.6 9.5 8.7
STOCK OF SEMI\FINISHED PRODUCT TO COST
OF SALES 9.9 13.4 14 11.6
NET PROFIT TO GROSS BLOCK 4.2 10 15.7 11.3
NET PROFIT TO TURNOVER 8 16.3 20.9 13.8
NET PROFIT TO CAPITAL EMPLOYED 8.3 21 36.8 26.7
CURRENT ASSET TO CURRENT LIABILITIES 176.6 188.6 193.7 205.2
QUICK ASSET TO CURRENT LIABILITIES 27.6 27.2 32.4 27.5
WORKING CAPITAL TO COST OF SALES 10.5 12.6 7.7 7.7
WORKING CAPITAL TO NET BLOCK 11.2 15.6 12.1 14.9
WORKING CAPITAL TO TURNOVER(GROSS) 8.2 9 5.3 5.8
COST OF SALES TO TURNOVER (GROSS) 78.2 71.3 67.9 74.8
INVENTORIES (OPRN)TO VALUE OF
PRODUCTION 16.5 17.6 15.5 14.8
COST OF PRODUCTION TO VALUE OF
PRODUCTION 92 84.1 79.5 86.2
LABOUR COST TO TURN OVER(GROSS) 10.9 12.1 14.5 10.3
61
ANALYSIS OF DIFFERENT RATIO”S
ACID TEST RATIO: - WE can find that SAIL is a whole is having a comfortable liquidity
position and it can meet its current obligation without any type of hurdles at any time. Again it
has to be said that the differences between current between current ratio and quick ratio is that of
inventory. So, from this scenario we can easily say that inventory play a vital role in the
composition of capital structure.
INVENTORY TYRNOVER:- It is always desirable for a firm to maintain a balance level of

inventory. All the manufacturing plants have improved their inventory turnover ratio from the
previous year. Through DSP demoted in rank as compared to previous year i.e. 2005, but it has
improved its inventory turnover ratio to a good extent from 8.88 times in 2005 to 9.33 in 2006.
NET PROFIT
Net profit margin ratio measures the overall profitability and efficiency of the management in
generating additional revenue over the total operating cost. It can be viewed that inspire of
having positive gross margin the net margin ratio is negative for Durgapur Steel Plant, RSP as
well for SAIL in the year 2002 and 2003. This is mainly due to excessive indirect expenses on
which it has no control like on the wastage of raw materials and expenditure and surplus labor. In
this year2006 and 2005, the position of DSP and SAIL has been improved. So, by analyzing GP
ratio and NP ratio we can say that the performance of DSP is not as satisfactory is it should be.
GROSS PROFIT RATIO
The gross margin ratio is used to explain the relation between sales and gross earning .it shows
after matching of dividend expenses according to the above data, the position of Durgapur steel
plant was better as compared to SAIL as whole in the year 2004.In the year 2005the gross margin
of DSP falls from 8.34%to 7.5%, where else in case of sales it increased from 6.25%to 11.25%.
This improvement is due to the good performance of BSL.Again it has to be said that year 2006
is good for both DSP and SAIL. But in the year 2007 the ratio took a fall due to fall in
price.to2002 that indicates
OPERATING RATIO
The figure shows that the operating ratio of DSP decreases in2004 that is 81.32% in compare to
2003 this indicates that surplus in the hand of DSP in current year 2007decreases then compare to
the previous year for the payment of interest and dividend. This decrease in surplus is incurred
mainly due to increase in cost of production.
62
CONCLUSION AND RECOMMENDATION

i. After analysis of various components of working capital and trend in last 5 year ,we can
conclude that DSP is managing its working capital efficiently .It has reduced inventory of
raw materials and increased stock of finished and semi finished products it has also
reduced stores and spares thus investing reasonable working capital. It has also reduced
its current liability to a large extent.
ii. Again from working capital turnover ratio we can see that performance of DSP is very
close to ideal ratio 1.21:1.In the past 2 years current ration was bit high, it is mainly
because of some poor planning. As plant has all capability, a good pool of managerial
talent so very soon it will attain ideal ratio.
iii. We have also done inventory analysis and have shown, components of inventories
separately and found that the stock of these different components remain unused in stores
for very brief period. This reduces blockage of fund in terms of inventories.
iv. In comparison with other major steel plant working capital in DSP is little more and
shows an upward trend, it is mainly because of rapid development of plant.DSP has
increased its capacity many fold. Increased capacities require more working capital
Thus by making a component analysis of working capital management of

DSP by giving individual focus on working capital turnover ratio , inventory
analysis , trend of turnover of different products .Ultimately we conclude that
DSP is having a good working capital management.
63
SUGGESTION
1. DSP should concentrate more on JIT technique of manufacturing and inventory
management. This will minimize the blockage of fund by reducing holding cost.
2. Company should search for more supply sources (other than available sources). So that
company can minimize cost of raw materials.
3. Company must develop a dynamic team of marketing professionals.
4. Company should have close watch over wastage of electricity, raw materials and labor
hours etc.
5. The equity becomes an important tool of differentiation so company must incorporate

TQM in all departments.
6. Very few cases, Plant go for credit. The credit policy of plant should be evaluated
regularly so as to prevent increase of bad debt.
7. The security should be made sticker to control the losses due to theft.
8. Use security in case of import or export to control the losses due to theft.
9. Use new techniques to make the production good or more.
64
Research Methodology
Statement of the Problem:-
“To Study the method of working capital management and it’s financing for the steel industry
with special reference to Durgapur Steel Plant.”
The steel industry is going through a very critical phase, with prices of raw material rising, high
demand both in domestic and international market, increasing pressure from the government and
a production crunch.
In such a situation, effective management of working capital is very essential for optimizing
operating cost and to deal with such adverse situations efficiently.
The project will be highlighting the various strategies and methods for managing of working
capital and it’s financing.
65
Scope of the Study
A study on financial strategy of DURGAPUR STEEL PLANT, with the practical training on
working capital management & it’s financing.
• To find out the working capital management & it’s financing to Durgapur Steel Plant.
• To gain familiarity with the components of working capital in DSP.
• To find how different components of working capital are managed at DSP.
• To come out with any solution for improvement in working Capital Management at DSP.
• To know the practical practices in Durgapur Steel Plant.
Objectives of the Study
This study can help in following ways:
This study will help the new players to decide which method of working capital management and
its financing they can adapt to fully utilize their resources, in the steel industry.
The study will help the existing players to understand and implement an appropriate working
capital management.
To find out the feasibility of the working capital management and financing method followed by
Durgapur Steel Plant.
This study will help players in the steel industry to reduce costs incurred.
The study will help in reducing the idleness of cash and provide efficient working capital through
maintaining need based cash balance without distributing the liquidity needs of the business.
66
The study will also show the challenges that the steel industry will face and market share and
growth rate they will have in the future.
Tools for Data Collection:-
To have a proper understanding and defining the boundaries of research brainstorming was done
within the team, discussion were held with experts in management fields, and a few relevant
books and magazines were studied.
I have prepared my project to collect both Primary data & Secondary data.
1. Primary Data
The data are taken from meetings and interviews with various managers and employees
of finance department of Durgapur Steel Plant. As per instruction of my external guide, I
have visited to the following departments.
• Main Cash Department

• Billing and Operation Department
• Cash & Budget Department
• Raw-Material Department
• Purchase Department
• Sales Department
• Project Management Department
2. Secondary Data
The other already available data were obtained from various sources namely.
• Balance Sheet.
• Profit & Loss Account.
• Annual Report.
• Accounting Reports.
• Costs & Budgets Report.
• Cash Report.
• Creditors Report.
67
• Debtors Report.
• Raw Material Report.
• Stock Report.
• Production Report.
• Sales Report.
• Financial Report.
• Plant Account Books.
DURATION
We have the time constraint of 30 days.
Contact Method :- Interview
Limitations
1. SAIL/DSP is a huge steel plant so that in 4 weeks it is not possible to study deeply.
2. Components of inventories are huge in number and are materials wise, so, it is not
again possible to study deep into each of those inventories.
3. In some cases actual figure is not available.
4. Calculation is confusing in some cases.
5. Due to financial year ending, the concerns officers were not available at the time
when needed.
Due to financial year ending & auditing, the information about the year 2007-08 was not
available for the analysis.
68
BIBLIOGRAPHY
 Profit & loss A/C of DSP for the year 2002-2003, 2003-2004,2004-2005,2005-
2006.
 Balance sheet of DSP for the year 2002-2003,2003-2004,2004-2005,2005-

2006.
 Annual report of SAIL for the year 2004-2005,2005-2006.
 www.sail.co.in.
 Financial management by I. M. Pandey.
 Accounting theory & Management Accounting by Debasish Banerjee
 Financial Bulletin of Durgapur Steel Plant.
 Profit & loss A/C ,Balance sheet & Annual report OF BHILAI STEEL
PLANT for the year 2002-2003,2003-2004, 2004-2005 , 2005-2006.
69
 Profit &loss A/C , Balance sheet & Annual report OF ROURKELA STEEL
PLANT for the year 2002-2003,2003-2004,2004-2005,2005-2006.
 Profit &loss A/C ,Balance sheet &Annual report OF BOKARO STEEL

PLANT for the year 2002-2003,2003-2004,2004-2005,2005-2006.
ANNEXURE
70
ROURKELA STEEL PLAN

Balance sheet as at 31st March 2008
31st 31st 31st
March,2008 March,2007 March,2006
(Rs in crores) (Rs in crores) (Rs in crores)
SOURCES OF FUNDS
Shareholder's Fund
reserves and surplus 218.08 0 0
Loan Funds
secured loans 16.94 21.41 21.27
unsecured loans 0 2.75 5.36
inter unit current account 16.94 24.16 26.63
9566.9 10321.67 10102.12
9801.92 10345.83 10128.75
APPLICATION OF FUNDS
Fixed Assets
Gross Block 6519.92 6320.24 6303.26
less:depreciation 3634.92 3341.999 3083.06
net block 2885 2978.25 3220.2
capital work in progress 296.24 182.96 114.57
3181.24 3161.21 3334.77
Investments
Current Assets,Loans &
Advances
71
inventories 870.13 877.56 718.11

sundry debtors 11.66 12.96 14.6
cash & bank balances 20.66 18.79 17.22
interest receivable/accrued 1.58 1.83 2.47
loans & advances 248.15 230.94 212.72
1147.18 1142.08 965.12
less:current liabilities &

provisions
current liabilities 672.33 557.26 499.45
provisions 939.67 635.75 569.48
1612 1193.01 1068.93
Net Current Assets -464.82 -50.93 -103.81

Miscellaneous
Expenditure 7.39 15.41 26.27
Profit & Loss Account
Debit Balance 0 1183.25 2516.95
Inter Unit Current
Account 7078.11 6036.89 4354.57
9801.92 10345.83 10128.75
PROFIT AND LOSS ACCOUNT

31st 31st 31st
INCOME
Sales 7321.66 6335.9 4586.65
less:excise duty 1012.01 873.99 662.02
6309.65 5461.91 3924.63
finished products internally
consumed 29.09 27.91 28.5
interest earned 10.63 10.3 7.52
other revenues 79.15 78.95 61.83
provisions no longer required
written back 6.86 16.68 9.69
stock transfer to other units 63.19 59.11 46.07
6498.57 5654.86 153.61
1078.24
EXPENDITURE
accretion(-)/depletion to stocks 26.16 -24.49 -161.34
raw materials consumed 2311.81 2144.68 1680.59
employees remunaration & 1114.77 738.81 591.3
72
benefits
stores & spares consumed 483.23 438 370.88
power & fuel 397.91 364.49 302.14
repairs &maintenance 59.39 47.75 56.1
freight outward 105.99 108.34 131.62
other expenses 164.26 155.58 153.21
share of expenditure over
income
corporate office 57.78 39.45 31.4
CMO 38.81 33.88 36.69
CCSO 5.34 2.82 2.52
Interest & finance charges 79.65 32.8 112.23
depreciation 304.37 291.92 288.27
total 5149.47 4374.03 3595.61
less:inter account adjustments 52.03 53.97 19.46
5097.44 4320.06 3576.15
Profit for the year 1401.13 1334.8 502.09
adjustments pertaining to
earlier years 0.2 1.6 -5.58
Net profit for the year 1401.33 1336.4 496.51
balance brought forward -1183.25 -2516.95 -3031.46
less:provision towards long
service 0 2.7 0
awards to employees upto 31-
03-06
Balance carried over to
balancesheet 218.08 -1183.25 -2516.95
INVENTORIES
31st 31st 31st
Stores and spares 320.52 303.44 216.36
add: in-transit 19.7 19.85 24.92
340.22 323.29 241.28
less:provision for non
moving/obsolete items 39.58 39.34 39.2
300.64 283.95 202.08
raw materials 139 151.04 108.41
add:in-transit 35.19 24.8 15.46
174.3 175.84 123.87
73
less:provision for unusable materials 0.99 1.28 1.26

173.31 174.56 122.61
semi/finished products (including
scrap) 396.18 419.05 393.42
870.13 877.56 718.11
74
75
BOKARO STEEL PLANT
, Balance sheet as at 31st 31st 31st 31st

march.2008 march,2008 march,2007 March,2006
SOURCES OF FUNDS
Shareholder's Fund
reserves and surplus 16187.54 13357.11 10625.85
Loan Funds
76
secured loans 69.42 87.18 90.52

18859.84 16324.38 13522.87
Fixed Assets
Gross Block 7072.41 6746.53 6686.89
net block 2282.24 2164.87 2339.23
2658.77 2438.03 2504.14
Investments 0.1 0.1 0.1

Current Assets,Loans &
Advances
inventories 1185.74 1407.49 1365.56
cash & bank balances 44 41.08 37.9
loans & advances 587.45 390.9 391.18
1835.88 1862.44 1826.11
less:current liabilities &

provisions
provisions 1870.81 1322.67 1239.82
2895.37 2169.53 2088.88

Miscellaneous Expenditure 14.81 29.41 42.85
Inter Unit Current Account 17245.65 14163.93 11238.55
18859.84 16324.38 13522.87
31st 31st 31st

INVENTORIES 8 07 06
(Rs in (Rs in (Rs in
crores) crores) crores)
77
add: in-transit 61.93 62.99 65.81

520.62 432.95 393.34
467.98 378.46 341.29
raw materials 149.3 229.52 203.69
add:in-transit 19.34 21.97 52.52
168.64 251.49 256.21
less:provision for unusable
materials 0.36 0.36 0
168.28 251.13 256.21
scrap) 549.48 777.9 768.06
1185.74 1407.49 1365.56
BHILAI
STEEL PLANT,
31st 31st
P&L Account for the year ended March,200 March,200
31st march.2008 31st March,2008 7 6
78
INCOME
16517.8 13526.3
Sales 1 1 11217.27
less:excise duty 2165.45 1836.5 1534.36
14352.3 11689.
6 81 9682.91
finished products internally consumed 99.56 101 88.86
other revenues 183.84 199.88 243.92
provisions no longer required written
back 1.24 3.07 10.67
14852.0 12352.
2 51 10209.15
EXPENDITURE
accretion(-)/depletion to stocks -113.46 -30.2 -322.24
employees remunaration & benefits 2085.51 1306.58 1028.95
stores & spares consumed 1141.6 991.24 896.48
power & fuel 827.63 770.18 801.69
repairs &maintenance 166.46 117.65 105
freight outward 273.96 220.51 235.02
other expenses 451.48 389.47 349.53
share of expenditure over income
CMO 109.64 78.27 79.84
CCSO 4.17 2 2.06
depreciation 216.68 223.43 204.37
10056.7
total 2 8465.4 7798.41
8065.2
9486.45 2 7427.41
4287.2
5365.57 9 2781.21
adjustments pertaining to earlier years 0.8 -15.7 -0.14
4271.5
Profit before tax 5366.37 9 2781.07
19192.7 14926.
balance brought forward 7 94 12145.87
less:provision towards long service
awards to employees upto 31st
march,2006 0 5.76 0
Balance carried over to balancesheet 24559.1 19192. 14926.94
79
4 77
31st 31st 31st

SAIL,BHILAI STEEL PLANT March,200 March,200 March,200
,Balance sheet as at 31st march.2008 8 7 6
SOURCES OF FUNDS
Shareholder's Fund
reserves and surplus 24572.51 19205.34 14937.16
Loan Funds
secured loans 71.59 43.65 45.61
27120.2 21974.3 17689.46
Fixed Assets
Gross Block 6649.05 6642.36 6306.7
net block 2285.09 2398.28 2255.18
3013.92 2671.38 2471.73
Current Assets,Loans & Advances

inventories 1712.9 1556.66 1505.76
loans & advances 480.73 325.12 218.44
2259.79 1951.26 1795.09
less:current liabilities & provisions

provisions 1774.75 1088.9 960.81
3077.98 2126.39 1877.93

27120.2 21974.3 17689.46
80
31st 31st 31st

INVENTORIES 008 007 06
add: in-transit 33.68 28.86 17.16
427.72 453.39 429.94
465.75 444.12 417.62
raw materials 229.14 284.47 328.62
add:in-transit 55.71 58.6 25.49
284.85 343.07 354.11
less:provision for unusable
materials 0.12 0.12 0.12
284.73 342.95 353.99
scrap) 962.42 769.59 734.15
1712.9 1556.66 1505.76
81
DURGAPUR STEEL PLANT,

31st 31st
31st March,0 March,0
Balance sheet as at 31st march.2008 March,08 7 6
SOURCES OF FUNDS
Loan Funds
secured loans 107.5 22.36 7.37
8950.54 9401.13 9426.63
Fixed Assets
Gross Block 6614.37 6261.36 6211.49
net block 2443.19 2572.25 2822.54
2668.45 2846.58 3023.06
Investments 0.01 0.01 0.01

Current Assets,Loans & Advances
inventories 761.97 691.51 539.23
loans & advances 119.34 91.54 77.73
914.95 808.25 9426.63
9426.63
less:current liabilities & provisions 9426.63
provisions 704.66 490.17 9426.63
1177 918.8 9426.63
9426.63
Net Current Assets -262.05 -110.55 9426.63
Profit & Loss Account Debit Balance 1593.84 2602.45 9426.63
8950.54 9401.13 9426.63
82
31st 31st 31st

INVENTORIES March,08 March,07 March,06
(Rs in
(Rs in crores) crores) (Rs in crores)
add: in-transit 4.64 8.27 6.79
171.77 159.39 136.37
less:provision for non moving/obsolete
items 20.55 20.68 20.4
151.22 138.71 115.97
raw materials 68.59 117.5 115.05
add:in-transit 6.08 5.91 11.13
74.67 123.41 126.18
less:provision for unusable materials 0 0 0
74.67 123.41 126.18
semi/finished products (including scrap) 536.08 429.39 297.08
761.97 691.51 539.23
83
SAIL,DURGAPUR STEEL PLANT,P & L 31st 31st 31st

ACCOUNT,31ST MARCH,2008 March,08 March,07 March,06
INCOME
Sales 5274.73 4287.68 3760.49
less:excise duty 645.24 530.07 483.99
4629.49 3757.61 3276.5
finished products internally consumed 6.02 4.03 3.14
other revenues 85.88 70.78 43.88
provisions no longer required written back 6.29 1.63 4.99
5103.14 4040.29 3411.64
EXPENDITURE
accretion(-)/depletion to stocks -79.51 -110.39 -7.34
purchases of finished/semi- finished products 0 0 0
employees remunaration & benefits 817.49 542.83 418.39
stores & spares consumed 382.44 358.52 323.62
power & fuel 244.99 225.37 225.45
repairs &maintenance 88.63 63.13 44.79
freight outward 119.91 119.5 95.06
other expenses 274.01 200.41 159.06
share of expenditure over income
CMO 37.43 31.76 26.94
CCSO 3.32 1.76 1.83
depreciation 301.26 299.9 295.68
total 4132.09 3456.42 3189.5
4094.34 3414.38 3174.83
1008.8 625.91 263.81
adjustments pertaining to earlier years -0.19 -2.15 -2.88
profit/loss(-)before tax 1008.61 623.76 0
profit/loss(-)after tax 1008.61 623.76 0
Net profit for the year 260.93
amount transferred from bonds redemption reserve 0 0
balance brought forward -2602.45 -3224.24 -3484.17
less:extaordinary items 0 1.97
84
amount available for appropriation -1593.84 -2602.45 -3224.24
APPROPRIATIONS
Balance carried over to balancesheet -1593.84 -2620.45 -3224.24
-1593.84 -2620.45 -3224.24
85

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WORKING CAPITAL MANAGEMENT &RATIO ANALYSIS

WITH REFERANCE TO DURGAPUR STEEL PLANT

At first I would like to pay my sincere thank to my external guide Mr.S.K.NAYAK,(Assistant

I am also thankful to my college INTERNATIONAL INSTITUTE OF PLANNING AND

VED PRAKASH CHOUBEY

Indian Steel Industry: An Overview

The economic liberalization 1991 marked the emergence of

Current economic indicators all predict growth. Continuously

-Steady GDP growth and investment in infrastructure are crucial

-Current state of low per capita consumption of steel (30kg)

*-Global steel demand is rising on the back of accelerated

-In US, the demand is led by booming housing industry.

-In Europe, there is demand from a buoyant housing and white

-Iraq reconstruction work is expected to fuel further demand for

-China is consuming steel like never before its infrastructure with

1.1. Industrial Definition

The Indian steel industry comprises producers of finished steel,

1.2. Industrial Segments

The industry can be classified into the following categories:

a) Iron Ore b) Pig Iron c) Sponge Iron

d) Flat Steel e) Long Steel f) Alloy Steel

2.1 Market Overview 2.2 Market Trends

India occupied the eighth *Low Per Capita Consumption

2.3 Key Drivers 2.4 Major Issues and

3. Political, Economical, Social, Technological Analysis

3.1 Political Factors 3.2 Economic Factors

Recommendations on Captive *GDP Growth Rate Reduction

3.3 Social Factors 3.4 Technological Factors

Rural-Urban Divide Higher Popularity of Steel Portals

4. Michael Porters Five Forces Analysis

4.1 Buyer’s Power 4.2 Supplier’s Power

Increasing Demand for Steel High Raw Material Prices Lack

Competition from Foreign High Cost of Basic Inputs and

The steel industry is in the growth phase. Indian steelmakers plan

 Hindustan Steel Limited.

 Hindustan Steel Work Construction Limited.

 Bokaro Steel Limited.

 Salem Steel Limited.

 Bharat Cooking Coal Limited.

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plant (RSP) in Orissa

Bokaro Steel Plant (BSL) in Jharkhand

IISCO Steel Plant (ISP) in West Bengal

Expanding Horizon (1959-1973)

 Bokaro Power Supply Pvt. Ltd

 Bhilai Electrical Supply Company Pvt. Ltd.

 UES SAIL Information Technology Ltd.

 Metal junction Company Pvt. Ltd.

 SAIL-Bansal Services Centre Pvt. Ltd.

 North Bengal Dolomite Ltd.

 Romelt – SAIL (India) Ltd.

About Durgapur Steel Plant

The city of Durgapur

SEMIS Bloom, Billets and Slabs

PLANT WISE DETAILS

BOKARO STEEL PLANT HR Coils and Sheets, Plates, CR Coils

CONCEPTS OF WORKING CAPITAL

Working Capital Management

Concepts of Working Capital

There are two concepts of working capital: